OPINION: Insurers say killing bill hospitals, pharmacists backed against pharmacy benefit managers saved Kentuckians money

By Tom Stephens
Executive Director, Kentucky Association of Health Care Plans

Pocketbook issues were front and center in this most recent session of the Kentucky General Assembly as runaway inflation at the national level continues to outpace wage gains. Lawmakers and the governor worked to ease inflationary burdens for working families by offering relief on hefty vehicle property tax increases caused by a pandemic surge in used car values. The General Assembly also moved to lower the personal income tax to keep more dollars in taxpayer wallets.

Tom Stephens

There were encouraging policy moves in health care as well. One driver of cost increases are government health-benefit mandates, which can add as much as 5 percent to coverage premiums. Kentucky has more healthcare mandates than the national average, but with a few exceptions, legislators largely resisted pressure from powerful lobbying groups to add more in 2022. This was a big win for Kentucky businesses and employees.

One group, the Kentucky Pharmacists Association, worked with an independent pharmacist in the General Assembly to introduce HB 203, a lengthy mandate bill that would have added a minimum $10.64 dispensing fee (5 times the current rate) to Kentuckians’ prescription drugs. The legislation also would have ended quality-driven, pay-for-performance contracts, significantly limiting the ability of companies and health plans to negotiate better pharmacy prices for their employees and members. This would have created a guaranteed payday for high-cost pharmacists. To further tip the scales in their favor, a pharmacist-controlled board would have been established to set future policies on prescription drugs.

As part of their legislative strategy, the pharmacists worked to broaden support for HB 203 and ratchet up pressure by allowing lobbyists for certain hospital systems to insert monopolistic provisions on specialty drugs (medications administered by a provider through injection or infusion typically, in a hospital outpatient setting or a provider’s office). This measure effectively banned a successful innovation known as “white bagging” or “alternate sourcing,” whereby health plans and businesses fight hospital price gouging by using specialty pharmacies to safely distribute these drugs.

Sensing a growing concern over the costs and complexity of the bill, proponents quickly pulled HB 203 before an official Kentucky Department of Insurance cost assessment could be posted. A Pharmaceutical Care Management Association analysis estimated that HB 203 would have increased prescription drug costs by a staggering $5 billion over the next decade. (Editor's note: PCMA lobbies for pharmacy benefit managers, firms that are middlemen between insurance and drug companies, determining what drugs are offered, at what price, and the payments to pharmacists.)

Immediately upon withdrawing HB 203, a slightly revised bill, HB 457, was introduced. It also drew heavy opposition from multiple Kentucky employers, including the Kentucky Association of Manufacturers, General Electric, Mercer and dozens of other Kentucky employers. The Kentucky Association of Health Underwriters rang the alarm: “This bill does nothing to address the cost of prescription drugs, it’s going to do the opposite.” The Kentucky Association of Health Plans pointed to the negative impacts by reminding legislators that the Department of Insurance statement showed a family of four would have paid up to $167 more a year for health coverage.

Fortunately for Kentucky businesses and individuals, HB 457 was not enacted into law. Senate President Robert Stivers illuminated HB 457’s potential effects in an end-of-session press conference when he said, “we started getting, from the business sector and the provider sector, comments and questions about what the overall cost would be to various plans because it would have cost impact on various health insurance plans, including potential fiscal impact to the state employees’ health plan.”

Kentucky businesses would be wise to stay vigilant and continue to raise their voices against expensive health care mandates and disruptions in the healthcare marketplace through legislation that does not have broad support from all stakeholders.

KAHP Executive Director Tom Stephens can be reached at tom@kahp.org.